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Hartford’s 3Q15: Resilience in Mutual Funds and Talcott Resolution

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Mutual funds

Hartford (HIG) reported core earnings of its mutual funds division at $22 million in 3Q15, similar to the prior year’s corresponding quarterly earnings. The division formed 6% of the company’s total core earnings. The earnings remained flat, as decreased fee income was offset by lower distribution and other operating expenses. The company’s assets under management declined by 7% due to market depreciation and outflows from Talcott Resolution assets under management. Talcott Resolution’s assets under management declined by 23% in the last year to $17.5 billion, mainly due to continued runoff and the planned asset transfer of $2.0 billion to Hartford Investment Management Company in 4Q14.

In 3Q15, mutual funds attracted flows totaling $307 million, partially offset by lower market levels. The company’s performance remained at par, with 54%, 60%, and 58% of funds outperforming peers on a one-, three- and five-year basis, respectively.

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Talcott Resolution

Talcott Resolution’s core earnings declined by 12% to $107 million in 3Q15, forming 29% of the company’s total core earnings. The decline was mainly due to lower net investment income resulting from lower income on limited partnerships or LPs and lower fees due to the continued runoff of the annuity business, partially offset by lower expenses. Investment income on LPs fell to $9 million from $45 million, although the decrease was partially offset by higher income on fixed maturities from make-whole premiums.

Hartford Financial reported a net income margin of 7.2% last fiscal year. Let’s compare this with the company’s peers:

  • Cincinnati Financial Corporation (CINF) – 10.6%
  • Markel Corporation (MKL) – 6.3%
  • Travelers Companies (TRV) – 13.5%

Together, these companies form 1.33% of the iShares Russell Mid-Cap Value ETF (IWS).

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